The world revelled in awe and shock from the Korean survival drama “Squid Game” in the third quarter of 2021. But at the same time, the result of a metaphorical tug-of-war was announced by the South Korean National Assembly. It heralded a significant defeat for the world largest technology companies of Google and Apple. The amendment to the Telecommunications Business Act came into effect in September of 2021 and introduced greater regulatory limitations on operators of mobile application markets. This legislative action received the moniker of the “Anti-Google” law by commentators. In the context of ongoing lawsuits around the world, seen in the previous article on Epic Games v Apple, this development has rippling effects as similar regulatory actions have surfaced in the other major markets.
The legislation regulates the commonly held practice of platform providers such as Apple’s 'Appstore' and Google’s 'Play Store' forcing the use of their own payment method on the application developers and their consumers in in-app purchases. The platform providers had included in their terms and conditions of such a condition, threatening removal of the application from their platforms when the requirements were not met. This had placed application developers in an unpleasant conundrum as the duopoly by Apple and Google meant that they had very little alternatives for mobile application platforms. Accepting this condition meant accepting 30% fee charged by the platforms. On top of prohibiting this practice, the legislation empowered the Broadcasting and Communications Commission to launch investigations into the application platform market.
For Apple and Google, this development was seen as formidable challenge to their oligarchic business model in the mobile application platform market. In South Korea, Apple’s 'Appstore' controls more than 90% of the market, which formed the basis of their ability to force the use of their payment method and charge high fees. In the short run, the disruption to their practice is predicted to adversely affect revenues earned from platform operation alongside potential fines from the breach of regulation. More significantly in the long run, this development may shake the current oligarchic market composition held by the tech titans. The fundamental reason for why Apple and Google were able to seize incredible market share in the application platform market was the integration of the internal operating system (of which the application platform is a part of) with the mobile devices. Especially for Google who provides its Android Operating System to external electronics makers such as Samsung Electronics who face similar concerns as application developers due to the immense market control by Google. The step of limiting Google’s grip over the application platform market may result in further regulation into Google’s anti-competition practices involving its operating system. This fear materialised for Google as South Korean Fair Trade Commission hit Google with a fine of approximately 200 billion won (£125 million) for its forcing of mobile electronic producers such as Samsung to use its Android Operating System. Therefore, the legislation deservedly earned the moniker “Anti-Google Law” because it goes beyond the market for applications market and threatens the larger operating systems market for Google.
While South Korea is not, in itself, a significant market for Google and Apple, the significance of the legislation is in its ability to inspire lawmakers of other developed countries. Acts of similar nature saw emergence in the United States, Europe and Japan. Most notably, a bipartisan bill was introduced in the United States Senate which sought to loosen Apple and Google’s charging of high payment processing fees to application developers. The European Commission also zeroed on Apple for its practices as well as accepting the allegation that Apple used its platform control against its direct competitors such as Spotify. A continuing of the trend of antagonistic regulatory actions against the duopoly is predicted to contribute to the conversation of management of the “Big Tech” in the 21st century.
From a commercial law perspective, it is seen that a rise in number of cases of anti-trust/competition and dispute resolution involving these tech companies is to be expected. Google has announced hiring of the ‘Whiteshoe’ law firm O’Melveny & Myers for anti-trust litigation in the United States. On the opposing side, ‘Magic Circle’ law firm Clifford Chance has stepped in to advise Epic Games, challenging Apple’s anti-trust practices, in the EU complaint.
In conclusion, the South Korean legislation is seen to be a defeat in the Big Tech’s many ongoing legal battles. Its rippling effects strike at the heart of the factor of their dominance; the creation of a seamless digital environment where essential services are offered in a package-like manner which creates a disproportionate power asymmetry in favour of these titanic companies. The clash for control between governments and the tech companies is predicted to result in a seismic shift in the global market strategy of the latter.